Martinelli gets it done! u gotta love this guy

Panama’s Presidential Temptation

Monday, October 25 2010 @ 08:45 AM EDT
Contributed by: Don Winner
Views: 308
By MARY ANASTASIA O’GRADY for the Wall Street Journal – Has Panama’s President Ricardo Martinelli put his country on track to be the region’s first flat-tax, open and competitive market economy, as he promised? Or is he just another caudillo, out to grow government and his own power? These questions are being hotly debated these days in Panama City, and the answers matter to more than Panamanians. As a self-proclaimed believer in markets in a region dominated by politicians from the left, Mr. Martinelli now carries the mantle of anti-chavismo. Candidate Martinelli promised to convert his country into a magnet for investment and a place of opportunity for his people. Failure to keep that pledge could damage the cause he stands for well beyond his own borders. (more)
When the U.S.-educated supermarket mogul took office in July 2009, market liberals were ecstatic and the left was groaning. Now there is gnashing of teeth from the right. He told me his side of the story when he was in New York last month for the United Nations General Assembly.

The president began our conversation boasting about the variety of new trade agreements his government has either signed or is in the process of negotiating. Panama has also dropped all import duties (“with the exception of six or seven products negotiated at the World Trade Organization”) to 10%. Then, he said, during the general assembly President Obama made him a promise about the U.S.-Panama free trade agreement: “The first thing I did when I was shaking his hand is that I said, ‘President Obama, whenever the U.S. is ready, Panama is ready.’ And he told me, ‘We’ll have to get that done after the election.’ Then we took a picture and he said ‘You can rest assured that we’re going to have that after the election.'”

Mr. Martinelli was also eager to talk about his plans to streamline the process of land titling and make it affordable. “We want [homesteaders] to own their property,” he said.

On taxes, he said he is making important progress toward his goal of a single rate. He has started by raising the VAT to 7% from 5% and “reducing corporate taxes to 25% from 30% and income taxes for individuals to 15% from 27.5%.”

He adds that he has maintained a budget deficit of 1.5%, in part because he has been closing corporate loopholes. As a result of this, if the VAT is moved to 8%, the corporate rate can go to 20%. The goal is to get to a 10% rate across the board, something he says could happen by 2014.

So what’s not to like? Try his decision to hike the minimum wage by 30% in key sectors, a truly bizarre move in a country where 40% of the economy is underground. When the government raises the price of labor it exacerbates the problem of informality. It is also creates a drag on foreign investment. Neither can be good for the 30% of Panamanians living in poverty and the 14.4% in extreme poverty, according to World Bank 2008 statistics.

Worse is his rationale for doing it. “Don’t you think that [stores selling high-priced goods] could afford to pay a little bit more so that guy can qualify to buy a car or a house? That would spur growth,” he reasons. When I point out that it is his opinion that wages were too low, he responds, “That’s BS. Sorry.”

This exchange reveals what seems to most trouble market liberals about Mr. Martinelli: He has an autocratic manner and a pronounced tendency toward statist grandiosity. Other examples abound. The government will build a skyscraper in the capital to house public offices and create, in his words, “an icon for the city.” There is also a planned “governmental city” in the works, where a metro and bus lines will transport throngs of state employees.

Mr. Martinelli says the projects will save the cost of rent and denies he is expanding the government. But almost 5,000 public-sector employees have been added to the payroll in his first year in office, and salaries are up 7.9% in the first seven months of this year according to the national accounting office.

If this keeps up, who cannot imagine that the promise of a 10% flat tax will soon evaporate in the face of a loud clamor for tax increases to pay for deficit spending? At that point there will be regret about not getting rid of the income tax before raising the VAT.

Mr. Martinelli understands the needs of business. But he is also accustomed to being the man in charge, and the pitfalls of allowing government to grow like Topsy seem to elude him. This is worrisome. He wouldn’t be the first well-intentioned planner to be brought low by this fatal conceit.

Editor’s Comment: The author apparently didn’t take ten minutes to examine the fundamentals of the Panamanian economy – ironic when you’re writing for the Wall Street Journal. Here’s Panama Economics 101. When the Panama Canal expansion is completed in 2014 the Panama Canal (alone) will bring $5 billion dollars annually into the Panamanian economy. That’s fresh money from outside the country – think of Panama as exporting services if that helps. Of that $5 billion about $3 billion or so will be spent right here in Panama on operations and maintenance of the Panama Canal. Meaning, the money passes through the hands of the Panama Canal Authority once and then gets spend on salaries, fuel, materials, services, etc., so it all goes straight into the Panamanian economy anyway. And the other $2 billion dollars will be handed directly to the central government of Panama – in cash – to spend as they see fit. Now in the United States $5 billion dollars of cash infusion every year is nothing, but in tiny Panama with a population of just 3.2 million that’s huge. $5 billion dollars, every year, like clockwork. So what it Martinelli wants to spend $2 billion on a new Metro system. Have you ever driven in Panamanian traffic? It’s needed. Whatever. This is another unflattering article from the mainstream media in the United States about Martinelli in less than a week. Want to know why? Martinelli is doing in Panama EXACTLY what needs to be done in the United States. He is a perfect role model for what should be happening in Washington. And the left wing can’t stand to see a guy like Martinelli develop a model in Panama that’s working – so they have to tear him down. That’s what they do. Martinelli told this reporter “that’s BS.” Right again. Screw these guys, they’re clueless.

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One Response to “Martinelli gets it done! u gotta love this guy”

  1. anna cisneros says:

    President Martinelli is the only president who is trying to help my country Panama, you can’t said he is like Noriega you need to live en my country by Noriega’s times, was the worse years of my life. you can’t compare, you are talking garbage, after the US bases closed Panama got very bad trying with goverment and bad Presidents only think about themself, Mireya only was worry how I look good and the other people of her govermrnt took times to do very bad deals and Martin Torrijos only had in his goverment all the killers, batalloneros de Noriega y dealing witht the big companies to give him money and let them do what ever they want. Balladares try but because he had in those times same people of Noriega he can’t help Panama. Torrrijos 70’s and Noriega times were to dificulta they only wants to ta Is easy to write about other but for me you need to live, sleep, eat and be a Panamenian to know what to said or write

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